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Guild Mortgage ultimately posted a loss in 2023 as rising mortgage rates curbed lending but helped the company pursue a strategy of growing market share through acquisitions.
Guild’s parent company, Guild Holdings, reported Net loss of $39.1 million in 2023 On Tuesday, mortgage originations fell 21% from a year earlier to $15.3 billion. While revenue fell 44% to $655 million in 2023, Guild’s expenses fell just 6% to $701 million.
But the San Diego-based bank, which generated $329 million in profit in 2022, said its balance sheet and liquidity remained healthy as it pursued a growth strategy.
Guild, which had $120.3 million in cash and cash equivalents as of Dec. 31 and $1 billion in unused loan financing capacity, announced last month that it had reached an agreement to acquire Utah-based direct lender Academy Mortgage. Guild said the deal would increase its loan originations by 25% and make it the eighth-largest non-bank retail mortgage lender in the U.S.
This is Guild’s fifth acquisition in the past 18 months, including deals for First Centennial Mortgage, Cherry Creek Mortgage and Legacy Mortgage in 2023.
“By exercising discipline and focusing on maintaining a strong capital position, we have effectively made complementary and compelling acquisitions and team additions to Positioning us for growth as the economic cycle turns.”
Guild Holdings sharesOver the past 12 months, it has traded as low as $9.45 and as high as $15.06, down 8% from Tuesday’s closing price of $14 in after-hours trading following the earnings release.
Guild mortgage loan origination volume to fall by 21% in 2023
In addition to $14.96 billion in in-house mortgages, Guild also brokered $268 million in mortgages, products it typically doesn’t offer in-house. Together with reverse mortgage originations, the business brings total loan originations to $15.3 billion in 2023.
While that’s $4 billion less than the $19.3 billion in mortgage originations in 2022, the Guild’s strength in homebuyer mortgages helped cushion the blow from rising interest rates last year.
Purchase loans will account for 93% of Guild’s in-house mortgage volume by 2023, compared with 81% for the industry as a whole, according to the Mortgage Bankers Association’s Lender Survey.
“We continue to leverage the strength of our platform to grow market share as we execute on our strategy to focus on the procurement market,” said Schmidt. “We are proud to be the lender of choice for the communities we serve across the country seeking to secure a position in this market.” Providing creative solutions for homebuyers financing their homes in a high interest rate environment.”
In addition to originating mortgage loans, the Guild acts as a loan servicer, collecting payments from borrowers on behalf of investors in mortgage-backed securities.
Guild’s mortgage servicing rights portfolio grew 8% to $85 billion in 2023, generating $246 million in loan servicing and other fees, a 10% increase from the prior year.
But falling mortgage rates in the final quarter of 2023 forced Guild to write down the value of its mortgage servicing rights, largely due to the increased risk that some of the borrowers it services will refinance and ultimately switch to another servicer.
In the fourth quarter of 2023, markdowns on the fair value of the company’s mortgage servicing rights totaled $134.7 million, resulting in a net loss of $93.1 million for the quarter.
“Looking ahead, we are encouraged by the emerging market stabilization but expect a more subdued environment in the near term, particularly in the first quarter of a seasonal slowdown,” Schmidt said.
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